US Reciprocal Tariffs to Have Limited Impact on India: Niti Aayog

US President Donald Trump will implement a series of reciprocal tariffs on what he refers to as “Liberation Day,” with an official announcement scheduled for 4 p.m. (local time) on Wednesday in the White House Rose Garden. These reciprocal tariffs are part of a broader set of import duties that President Trump has introduced since taking office on January 20. The measures include high tariffs on imports from Canada and Mexico, industry-specific tariffs on metals, and more recently, on imported automobiles.

US Tariffs to Create Opportunities

Niti Aayog Programme Director Mr Pravakar Sahoo has reassured that the United States’ plan to impose reciprocal tariffs will have a limited impact on India and could present growth opportunities for the nation. Mr Pravakar Sahoo further added that unlike other major US trade partners, such as China, Mexico, and Canada, India is relatively well-positioned in this situation.

While these countries face tariffs ranging between 20-25%, India’s trade dynamics with the US are less vulnerable. The country accounts for a smaller portion of US imports and is not expected to be significantly impacted by the proposed tariff changes.

Though some specific sectors may experience minor challenges, the overall effect on India’s economy is expected to be minimal. A more comprehensive analysis of the situation will be shared in the upcoming edition of Niti Aayog’s quarterly trade watch, providing deeper insights into the potential consequences for India.

US Tariffs on Steel, Aluminium, and Autos

The US has already imposed 25% tariffs on key products such as steel, aluminium, vehicles, and auto parts, affecting several trade partners. However, countries like India, Taiwan, Vietnam, Thailand, and Mexico have benefited from these tariff measures. Despite the imposition of tariffs on China in 2018, these nations have managed to increase their share in US imports, showcasing the evolving dynamics of global trade and the shifting of market shares.

Future of India-US Bilateral Trade

Ongoing negotiations between India and the US aim to finalise the first phase of a trade agreement by the fall of 2025. This agreement is expected to more than double bilateral trade, targeting ₹42,78,000 crore (US$ 500 billion) by 2030. As these negotiations progress, India’s strong manufacturing capabilities and growing Foreign Direct Investment (FDI) potential make it an increasingly important player in global trade.

Niti Aayog member Mr. Arvind Virmani has emphasised the need for India to strengthen its trade ties with major global economies like the US, EU, Japan, the UK, and South Korea. As India continues to expand its manufacturing base and attract more FDI, fostering deeper relationships with these key economic partners will be crucial for future growth.

Conclusion

While the US reciprocal tariffs may pose some challenges to specific sectors in India, the broader impact remains limited. With growing opportunities in global trade, India is well-positioned to leverage these changes for long-term growth and economic collaboration.

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